RiskMetrics report says oilsands could be riskier investment than Gulf of Mexico

BOSTON — The long-term growth of Alberta’s oilsands is in jeopardy unless the industry does a better job managing environmental and social risks, a well-known U.S. risk management firm said Monday.

BOSTON — The long-term growth of Alberta’s oilsands is in jeopardy unless the industry does a better job managing environmental and social risks, a well-known U.S. risk management firm said Monday.

Among other things, the report authored by RiskMetrics Group cites toughening environmental regulations, opposition from aboriginal groups and high consumption of water and natural gas as factors that could affect the bottom lines of oilsands producers.

“Companies must be willing to invest upfront to address these challenges when designing new projects, while recognizing that cost-effective solutions in many instances do not yet exist,” said the report, which was commissioned by Ceres, a coalition of investors and environmental groups.

“This quandary leaves oilsands producers exposed to growing risks and a shrinking window of opportunity that may close over time.”

Oilsands projects need crude oil prices of at least US$65 a barrel and as much as US$95 per barrel in order to be economically viable — and emerging carbon emission rules may only cause the floor to rise, the report said.

Greg Stringham, a vice-president at the Canadian Association of Petroleum Producers, said he didn’t see much new in the report.

“These are risks that have been identified and that we have been working on for many years as we develop the oilsands,” he said, noting that regulators have long forced producers to address the same issues.

The report comes as the world’s attention remains fixed on the aftermath of an oil rig explosion in the Gulf of Mexico. Crude have been spilling into the sea for nearly a month as BP PLC scrambles to contain the leak.

The risks of developing the oilsands are “arguably greater” than in the Gulf, the report said.

“It’s like the Gulf of Mexico spill, but playing out in slow motion. From a climate and ecological perspective, we’re really no better off,” Doug Cogan, director of climate risk management for RiskMetrics, said in a statement.

Stringham said it’s not fair comparison unless a wide array of energy sources are stacked up against each other.

“If there’s a report on the oilsands, we should expect to see from them a report on the nuclear industry and a report on different kinds of energy sources because they’re all part of the future mix that we see going forward,” he said.

Ceres president Mindy Luber acknowledged energy companies will continue developing the oilsands, which contain an estimated 175 billion barrels of oil reserves.

“But they shouldn’t do so blindly,” she said in the statement.

“Investors need assurances that the risks outlined in this report are being taken into account. This includes the fact that carbon will be regulated, that water will be increasingly scarce, that tailings ponds need to be cleaned up and that doing all this will be expensive.”

“Companies need to build solutions in up front or they should be building these projects at all.”

A coalition of business groups, spearheaded by CAPP, has stepped up its efforts to make the case for oilsands development.

The groups say development of that vast resource bolsters government coffers through taxes and royalties and creates jobs across Canada. Oilsands backers also point to ongoing progress in cutting water use, natural gas consumption and greenhouse gas emissions.

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